Pawn lender FirstCash to pay $9 million for MLA violations

For more than a decade, pawn operator FirstCash failed to comply with the Military Lending Act and has agreed to pay a $4 million penalty to the Consumer Financial Protection Bureau and $5 million for overcharging servicemembers on more than 45,000 small-dollar loans.

The surprise settlement, announced by the CFPB late Friday, harkens back to the bureau’s original research on payday lenders located near military bases that target servicemembers.

The CFPB in the Trump administration has dropped a majority of pending enforcement actions and lawsuits brought under the Biden administration. Acting CFPB Director Russell Vought has stopped nearly all enforcement and supervision but plans to focus on protecting servicemembers. 

The CFPB alleges that at least since 2016, FirstCash, based in Fort Worth, violated the Military Lending Act by charging more than the 36% maximum allowable annual percentage rate on 42,698 loans originated from October 2016 to August 2024. FirstCash also violated the MLA by requiring servicemembers to engage in arbitration to resolve disputes and failing to make required loan disclosures. 

Retired Army Col. Paul Kantwill, a former head of the CFPB’s Office of Servicemember Affairs, said the alleged violations by FirstCash appeared to have started immediately after the implementation of a 2015 Department of Defense rule that expanded protections for servicemembers to include pawn loans. 

“This could indicate, of course, that FirstCash had compliance issues from the very beginning of the implementation of the 2015 DoD rule,” said Kantwill, who advised the secretary of defense on the MLA and the Servicemembers Civil Relief Act.

“What we see here is a reflection that pawn loans, while advertised as less pernicious because they are ‘secured-collateral loans’ can be predatory and dangerous,” he said. “This is a very strong affirmation for the Defense Department’s decision to include pawn loans within the definition of ‘covered credit’ and therefore within the jurisdiction of the MLA and the Bureau.” 

In a 26-page consent order, FirstCash agreed to repay servicemembers the principal amount of each loan plus 120% of all fees, interest and other charges. As part of the proposed settlement, FirstCash is required to be in compliance with the MLA and either offer a compliant loan product to servicemembers and their families, or comply with a regulatory safe harbor arrangement to be promulgated by the Department of Defense for five years.

The consent order also requires FirstCash to provide the CFPB with transaction data on pawn loans so the bureau can identify which loans require redress. The order also requires that FirstCash’s board and CEO review all plans and submit compliance reports “the accuracy of which is sworn under penalty of perjury,” the CFPB said in the order.

Rick Wessel, FirstCash’s CEO, said in a statement that he was “pleased to have reached this agreement with the CFPB.

 “While we disagree with the CFPB’s allegations regarding our military lending practices, we believe that agreeing to this settlement and putting this matter behind us is the best path forward for the company,” Wessel said in a press release. 

The CFPB filed a lawsuit against FirstCash and a subsidiary, Cash America West, in 2021, and added 18 subsidiaries to the suit in 2022. FirstCash operates 3,000 pawn shops in the U.S. and Latin America.